Inc. magazine has named a book written by Savannah resident Jeff Connaughton as one of the best business books of the year for 2012.
The Payoff; Why Wall Street Always Wins, (Prospecta Press, 2012) is Jeff Connaughton’s memoir about his 23 years in Washington, D.C.
Inc.’s introduction to the book says: “You’d think after destroying the world’s economy with dodgy trades and double dealing at least somebody (other than the taxpayer) who was responsible might get thrown in jail. But you’d think wrong because Wall Street essentially “owns” both political parties, thereby making accountability impossible.” Connaughton explains this dilemma from the inside.
Jeff Connaughton moved to Savannah in 2011 after working in the power halls of Washington, D.C. Following four years in investment banking with Smith Barney and EE Hutton, he started his political career in 1987 as deputy national finance director for then Sen. Joe Biden’s failed presidential campaign.
Biden then appointed Jeff as his special assistant to the Senate Judicial Committee, which he chaired. Jeff then clerked for Judge Abner Mikva of the U.S. Court of Appeals for the D.C. Circuit. When Mikva was appointed Clinton’s counsel, he took Jeff into the White House. At the end of Clinton’s term, Jeff founded one of Washington’s most powerful lobbying firms, Quinn Gillespie & Associates.
When Biden tried a second time to win the Democratic nomination for president in 2007-08, Jeff returned to his campaign staff. After Biden’s election as vice president, Jeff became chief of staff for Ted Kauffman, Biden’s top assistant, who had been appointed to complete Biden’s two years in the Senate.
With Sen. Kauffman, Jeff led the effort to pass substantial reform of the financial system. He holds an MBA from the University of Chicago and a J.D. from Stanford Law School. He was raised in Alabama.
Toward the end of his book, which reads better than most suspense dramas, Connaughton summarizes a talk he gave on Wall Street as he prepared to leave the government in 2010. He asked four questions.
First, was there fraud at the heart of the financial crisis? His answer was yes, though you must read his book to find his reasons.
Then he asked whether the law enforcement response so far achieved effective levels of deterrence against financial fraud. His answer was negative.
Third, are federal law enforcement agencies sufficiently capable of detecting fraud and manipulation, particularly in markets that are increasingly complex? Sadly, the answer was again negative.
Finally, should Wall Street itself care about all this? Here the answer is positive. Without solving these problems Wall Street could suffer even worse governmental actions in the future.
Connoughton explains from personal experience how Wall Street firms gain influence.
They hire congressional staff and former legislative leaders. They pay for access to key representatives and senators who are constantly raising funds for their next campaigns. They also pay expensive lobbying firms who themselves are staffed with former congressional leaders.
What must our country do to save government from the “ruling financial elite”?
According to Connaughton, we must first convince all political parties that the issue of financial reform in not political. Instead, it is center to the future of our economy. Then we must force issues of financial reform into every congressional and presidential election.
Third, we must get money out of politics. Until we do this, Wall Street, which has more money than any other interest group, will always buy their influence. Finally, we must limit the revolving door between governmental positions and the Wall Street firms these governmental agencies are designed to regulate.
Investors, regardless of their political affiliation or philosophy, will benefit from reading Connaughton’s analysis of two key issues facing our economy: banks that are too big to fail and stock trading programs that enable funds and large day traders to take potential profits from individual stock investors.
Only someone who has been inside the financial system can properly alert us to these problems.
Kenneth Zapp is a professor emeritus at Metropolitan State University, an adjunct professor at Savannah State University and a counselor at SCORE Savannah. He may be contacted at Kenneth.Zapp@metrostate.edu.
Jeff Connaughton’s work in Washington is also the focus of an article in The New Yorker magazine, in their Oct. 29 - Nov. 5, 2012 issue.